Swamped by angry calls and e-mails, House and Senate
leaders abandoned plans yesterday to retroactively charge 48,000
taxpayers for capital gains incurred nearly four years ago and also
ordered thousands of refunds to investors....

Legislative leaders also plan to order tax refunds that would average
$1,750 for 157,000 taxpayers who paid at the higher tax rate that year.
Any refunds larger than $1,000 would be paid over a four-year period,
leaders said.

Those who paid the capital gains taxes at the higher rate in 2002 would
have to apply for the refund, they said. The state will not pay interest
on the refunds....

In recent days, several lawmakers said their offices were being deluged
with calls and e-mails from angry taxpayers, as talk radio shows stoked
the outrage and gave out the telephone numbers and e-mail addresses of
Travaglini and DiMasi....

The surprise reversal by Travaglini and DiMasi brings to an end a
bizarre string of events that began in the spring of 2002, when
lawmakers facing a fiscal crisis passed a mid-year capital gains tax
increase to raise revenues....

Michael Widmer, president of the Massachusetts Taxpayers Foundation and
a critic of the retroactive taxation plan, said his group has "received
more e-mails on this than on any subject since I came to the foundation,
15 years ago."

"I think [the Legislature] deserves high praise for this, coming
together and fixing a problem that was not of their making," Widmer
said.

Michael Widmer, president of the Massachusetts Taxpayers
Foundation, a business-backed watchdog group, agreed that rolling the effective
date of the capital gains rate change to Jan. 1, 2002, was "unfair." He said
that Romney's plan, however, would do damage to the fiscal health of the state
and that the money would have to come from reserve accounts.

Widmer added that he has strong doubts Democratic leaders in the House and
Senate have any intention or desire to go in the same direction as Romney in
response to the SJC ruling.

Thousands of desperate and angry taxpayers were given a
holiday reprieve yesterday after legislative leaders agreed to cancel a
retroactive "vampire" tax that would have socked people with $150 million in
back capital gains payments.

In addition, legislative leaders — who have been bombarded with phone calls from
furious taxpayers demanding they rescind the tax — said they will file a bill
next week that will rebate about $275 million over four years to thousands of
other people who already paid the 2002 tax....

"It was patently unfair and, financially, it would have been devastating," said
Dianne Van Nest, 70, who opened her mailbox on her birthday last week to find a
bill for $9,000 in back taxes. "I thought there must be some mistake."

More than 100 other people at Brooksby Village, the Peabody retirement community
where she lives, received similar bills. So Van Nest had them flood state
lawmakers with phone calls and letters demanding action.

"People were crying, 'What will I do?'" she said. "These aren’t tax cheats.
These are people who paid what they were told they owed." ...

Travaglini and DiMasi said they weren’t caving to public outrage over the issue
— just trying to right a wrong.

"It was always our intent that we were going to have to address this issue,"
[House Speaker Sal] DiMasi told reporters.

The Legislature finally did the right thing yesterday. All it
took was turning the spotlight on them, thousands of irate phone calls and an
incipient taxpayer revolt, and they suddenly decided to pull the plug on this
newest retroactive tax increase.

Thanks, guys.

But the thing about this proposed hike in the 2002 capital-gains tax that was so
aggravating — not to mention frightening — is that they have known about this
problem since April, and they’ve been taking roll call votes to correct the
situation since June, six of them in all, and the most votes the taxpayers could
ever muster was 56 out of 160 members.

What changed, fellas? ...

Welcome to Massachusetts, where the hacks’ motto is, What’s ours is ours and
what’s yours is ours.

"I am so glad that Speaker DiMasi and Senate President
Travaglini have ultimately realized what Republicans knew all along: that
retroactively taxing Massachusetts citizens is unfair and just plain wrong,"
said House Minority Leader Bradley H. Jones Jr., R-North Reading. "Once again,
pressure from the media and the public has compelled the Legislature to do the
right thing."

"We will enact legislation next week to right a wrong
situation that we've tried to deal with for more than two years now," said
Senate President Travaglini. "This corrective action is our response to an
unintended consequence in dealing with two decisions from the Supreme Judicial
Court."

"After the SJC issued two extraordinary decisions, the Legislature has worked to
resolve the situation in an equitable and responsible manner," said Speaker
DiMasi. "It was never our intent to have people pay retroactive taxes."

Michael Widmer, president of the Massachusetts
Taxpayers Foundation and a critic of the retroactive taxation plan,
said his group has "received more e-mails on this than on any subject
since I came to the foundation, 15 years ago."

"I think [the Legislature] deserves high praise for this, coming
together and fixing a problem that was not of their making," Widmer
said.

If you didn't know better, you'd understandably think
the president of the so-called
Massachusetts Taxpayers Foundation, Michael Widmer, was opposed to
the retroactive tax, that his organization was supporting taxpayers.
What other conclusions could you draw?

But in his
June 11 Boston Globe report on the retroactive capital gains tax,
the same reporter indicated that Michael Widmer was on the other side
of the retroactive capital gains tax:

Michael Widmer, president of the Massachusetts
Taxpayers Foundation, a business-backed watchdog group ... said that
Romney's plan, however, would do damage to the fiscal health of the
state and that the money would have to come from reserve accounts....

In yesterday's
CLT Update, I pointed out that Widmer was a former Dukakis
administration Director of Communications and Deputy Chief Secretary; no
doubt his initial response was the true Widmer and lasted until he
returned to his posh office and "received more e-mails on this than on
any subject since I came to the foundation, 15 years ago." I'll
bet he also got more than a few phone calls from his Big-Business
Fat-Cat members, and probably a number of personal knocks on his door!

*
*
*

According to today's Boston Globe report, yesterday,
House Speaker Sal DiMasi told reporters, "It was always our intent that
we were going to have to address this issue."

Yesterday, seeking to blunt the political fallout
of the unusual tax increase, House Democrats approved a Senate measure
to waive interest on the new capital gains payments and to exempt any
taxpayer who owes $100 or less. That bill would shave about $45
million off the $150 million to $205 million that the tax hikes will
reap, LeBovidge said. It would also reduce the number of people who
owe money from 48,000 to 40,000, he said.

The Legislature has tried to soften the blow of the
retroactive tax. An $85 million tax loophole bill sent to Romney this
week includes a provision that would waive capital gains tax bills for
less than $100, as well as penalties and interest. Romney amended the
legislation with his proposal, and returned it to the Legislature.

The Democratic-controlled Legislature, at the same
time, has repeatedly resisted Governor Mitt Romney's calls to return
the growing budget surplus back to taxpayers by rolling back the state
income tax rate and by refunding an unusual, retroactive capital gains
tax increase that 48,000 investors owe because of a court ruling.

"It was always our intent that we were going to have
to address this issue," Speaker DiMasi said yesterday.

I wonder what that Senate bill was that flew through
his House just three weeks ago -- practice until they got it right?

*
*
*

So much for MTF's Widmer and his pandering support
reported in the Boston Globe today: "I think [the Legislature] deserves high praise for this, coming
together and fixing a problem that was not of their making."

Then of whose making was it? The state Supreme
Judicial Court gave the Legislature a choice: set the tax increase
to start in either January 2002 or 2003; just not mid-year.
The Legislature -- the Democrat majority within it -- made the
decision, with Widmer's boost in June, MTF's cover again for another
legislative tax hike. It was that team alone which made it
retroactive -- not the court.

*
*
*

When I saw the Associated Press headline this
morning, "State tax collections off in Nov.," I wondered what this
meant, as the state government has enjoyed surging revenue for months now.
So I read further:

Tax receipts for November totaled $1.119 billion,
the same amount collected last November, but $4 million below the
state's official estimate for the month, revenue officials said.

So far this fiscal year, which began July 1, the state has taken in
$6.67 billion in revenues, up $435 million or 7 percent compared with
the same period last year.

On Oct. 26, the state increased its estimate, known as a benchmark,
for the fiscal year by $509 million.

After five months, fiscal '06 collections are $4
million below the revised benchmark. On October 26, the full-year
benchmark was raised by $509 million to $17.957 billion. . . .

And there it was! The state now has a new
"benchmark" as of the previous month -- increased from the prior
benchmark by $509 million. The goal post has again been moved, by
over half a billion dollars!

Five months into the new fiscal year the state has
collected $435 million more than it had taken in at this time last year.
We're still heading for another Billion Dollar Tax Revenue Surplus.
Unless the Legislature manages to spend it first. Legislators are
working hard to
do just that before they have to give any more of our money back.

Swamped by angry calls and e-mails, House and Senate leaders abandoned
plans yesterday to retroactively charge 48,000 taxpayers for capital
gains incurred nearly four years ago and also ordered thousands of
refunds to investors.

The 48,000 taxpayers sold assets in the first four months of 2002, but
they began receiving bills this fall to pay taxes for those transactions
at a higher rate than lawmakers enacted that year. The taxpayers can now
ignore the bills, lawmakers said.

Legislative leaders also plan to order tax refunds that would average
$1,750 for 157,000 taxpayers who paid at the higher tax rate that year.
Any refunds larger than $1,000 would be paid over a four-year period,
leaders said.

Those who paid the capital gains taxes at the higher rate in 2002 would
have to apply for the refund, they said. The state will not pay interest
on the refunds.

"If you want to view this as a corrective action, you can," Senate
President Robert E. Travaglini, an East Boston Democrat, told reporters
yesterday. He said the decision was "based on fairness and it's
certainly based on a set of circumstances that at the time was
unintended and spontaneous."

During a press conference yesterday, Travaglini and House Speaker
Salvatore F. DiMasi said they expect to pass the tax measure next week,
handing a major victory to Governor Mitt Romney as he readies himself
for a possible run for the White House in 2008.

"No one wants to have to give back tax money, but fairness comes first;
the Legislature recognized that," Romney said yesterday. "Collectively,
we found an answer that doesn't harm the Commonwealth and still supports
the respect we have for our citizens."

Despite criticism from Democrats yesterday over his trip to California
for the Republican Governors Conference, Romney praised the Democrat-run
Legislature for the tax refund plan.

"Most of the wins are shared wins, and in a state where my Legislature
is 85 percent in the opposition party, anytime I win they win, too," he
said. "So this is the kind of victory we share"

In recent days, several lawmakers said their offices were being deluged
with calls and e-mails from angry taxpayers, as talk radio shows stoked
the outrage and gave out the telephone numbers and e-mail addresses of
Travaglini and DiMasi.

"It's good for my family; my bill was about $3,000," said Mark Bernardin,
a stay-at-home dad from Andover who cofounded Citizens Against
Retroactive Taxation to fight the tax hike.

"I heard horror stories from families who were going to have to take out
loans to pay the bill," he said.

The surprise reversal by Travaglini and DiMasi brings to an end a
bizarre string of events that began in the spring of 2002, when
lawmakers facing a fiscal crisis passed a mid-year capital gains tax
increase to raise revenues.

The new tax rates were effective May 1, 2002, but after a group of
taxpayers sued, the Supreme Judicial Court ruled last year that the
midyear tax increase was unconstitutional.

The court gave the Legislature two options: Move the effective date of
the tax hike forward to Jan. 1, 2003 and forfeit up to $275 million or
move the date back to Jan. 1, 2002, and retroactively hit 48,000
taxpayers.

The Legislature, seeking to strike a compromise, responded by passing a
bill that would move the date back to Jan. 1, 2002, but provide amnesty
for those who would otherwise get hit retroactively.

That way, they could hold onto the money collected after May 1, 2002.

Again, the group of taxpayers sued, and, again, the SJC ruled that the
Legislature's plan did not pass constitutional muster.

Romney repeatedly called on the Legislature to forgo the $275 million
and avoid retroactively taxing citizens.

But as the session wound down, the House and Senate ignored the
governor's calls and instead passed a bill in November that would exempt
anyone owing $100 or less, and would waive any interest owed.

The governor refused to sign the measure and instead sent the
Legislature an alternative plan similar to the one the Democrats
announced yesterday.

Yesterday, several taxpayers said they were overjoyed that the
legislative leaders had changed course.

Chris and Bob Kochem, a Belmont couple who were expecting to receive an
$8,000 bill for the sale of a second home on Cape Cod, said they could
now afford a new coat of paint for their house.

The Kochems said the website they established two weeks ago,
Noretrotax.org, was receiving roughly 100 visitors a day since the state
announced its plans to mail out the tax bills.

"I was increasingly convinced that the Legislature would see the wisdom
of changing directions, and I'm thrilled that they've listened to the
people," Chris Kochem said.

As for those who already paid the taxes and will now be getting a
refund, there was much celebration as well.

"The right remedy, we believe, has finally come down," said Stephen
Schultz, the lawyer who filed the suits opposing the Legislature's tax
hikes on behalf of about 100 taxpayers who paid capital gains taxes in
the final eight months of 2002.

House Republican Leader Bradley H. Jones Jr. said he was certain the
leadership in both houses was being responsive to the growing opposition
to the tax hike.

"Do I think that the advocacy of the constituents and the citizens of
the Commonwealth and the near-unanimity in the media had an influence on
public policy? Yes, I do," he said.

Michael Widmer, president of the Massachusetts Taxpayers Foundation and
a critic of the retroactive taxation plan, said his group has "received
more e-mails on this than on any subject since I came to the foundation,
15 years ago."

"I think [the Legislature] deserves high praise for this, coming
together and fixing a problem that was not of their making," Widmer
said.

"What's happened is, as the notices went out, the implication of this
became a lot clearer in terms of the average folks being hit."

Tim Connolly, a spokesman for the Department of Revenue, said that the
agency had already mailed out 21,000 of the 48,000 bills seeking the
retroactive taxes. To date, only 10 taxpayers have sent in payments on
the bills, with a total paid of $95,000.

Thousands of desperate and angry taxpayers were given a holiday reprieve
yesterday after legislative leaders agreed to cancel a retroactive
"vampire" tax that would have socked people with $150 million in back
capital gains payments.

In addition, legislative leaders — who have been bombarded with phone
calls from furious taxpayers demanding they rescind the tax — said they
will file a bill next week that will rebate about $275 million over four
years to thousands of other people who already paid the 2002 tax.

The move comes a week after the state Department of Revenue sent bills
to about 48,000 people saying they had to fork over sometimes thousands
of dollars each in back payments.

Now, under the plan outlined yesterday by House Speaker Sal DiMasi and
Senate President Robert Travaglini, they can ignore those bills.

"It was patently unfair and, financially, it would have been
devastating," said Dianne Van Nest, 70, who opened her mailbox on her
birthday last week to find a bill for $9,000 in back taxes. "I thought
there must be some mistake."

More than 100 other people at Brooksby Village, the Peabody retirement
community where she lives, received similar bills. So Van Nest had them
flood state lawmakers with phone calls and letters demanding action.

"People were crying, 'What will I do?'" she said. "These aren’t tax
cheats. These are people who paid what they were told they owed."

Travaglini and DiMasi said they weren’t caving to public outrage over
the issue — just trying to right a wrong.

"It was always our intent that we were going to have to address this
issue," DiMasi told reporters.

"It’s based on fairness," said Travaglini yesterday.

Gov. Mitt Romney, who had urged lawmakers to rescind the tax with the
state running a budget surplus, said he was pleased by the leaders’
move.

Earlier this year, the Massachusetts Supreme Judicial Court struck down
the capital-gains tax hike that was supposed to start on May 1, 2002, on
the grounds that the tax couldn’t be implemented in the middle of the
calendar year. So lawmakers, rather than making the tax effective Jan.
1, 2003, made it retroactive to Jan. 1, 2002.

The move hit 48,000 unsuspecting taxpayers, prompting criticism it was a
retroactive tax.

The Legislature finally did the right thing yesterday. All it took was
turning the spotlight on them, thousands of irate phone calls and an
incipient taxpayer revolt, and they suddenly decided to pull the plug on
this newest retroactive tax increase.

Thanks, guys.

But the thing about this proposed hike in the 2002 capital-gains tax
that was so aggravating — not to mention frightening — is that they have
known about this problem since April, and they’ve been taking roll call
votes to correct the situation since June, six of them in all, and the
most votes the taxpayers could ever muster was 56 out of 160 members.

What changed, fellas?

If nobody had bitched and moaned, would it have been OK for the
Department of Revenue to spend Thanksgiving week mailing out 48,000
capital-gains tax bills — for the year 2002.

And on top of charging you for a tax increase that didn’t exist when
your capital gain occurred, the DOR added insult to injury by assessing
you interest because somehow you didn’t have the good sense to pay a tax
that didn’t exist at the time you cashed out some property or stock.

Of course, you’re lucky the reps didn’t hit you with a penalty on top of
the interest.

I spoke to the son of an 81-year-old woman from Cambridge last night.
She’d sold the family cottage in Hull for $75,000, and had been living
on the proceeds of the sale. Then she got the letter — she owed $3,300.

"She was physically sick at the Thanksgiving dinner," her son John was
saying last night. "And do you know when the payment was due? December
25."

Merry Christmas, Granny.

Welcome to Massachusetts, where the hacks’ motto is, What’s ours is ours
and what’s yours is ours.

What happened was, in 2002, the Legislature decided to raise the
capital-gains tax to deal with that year’s fiscal "crisis." The hike was
effective May 1, 2002, but one affected taxpayer sued, and the SJC — who
else? — ruled that it’s illegal to raise taxes in the middle of a year.

So the solons had a choice. Raise the taxes as of Jan. 1, 2003, or Jan.
1, 2002. Care to guess which way they went?

And the Legislature for months refused to cut the taxpayers any slack,
even as they hoarded a $1.7 billion rainy-day fund, and as tax revenues
for this year rose perhaps as much as $1 billion over estimates.

Oh sure, the solons offered a little something — very little. If you
owed less than $100, they were willing to waive the bill. Thank you sir,
may I have another?

It was so outrageous, even the bow-tied bumkissers of Morrissey
Boulevard called for the Legislature to go along with what Gov. Romney
wanted — a refund of the entire 2002 tax increase over three (now four)
years.

Here are a few of the victims who called the governor’s office:

* An 85-year-old woman from Millis. Got a $10,000 tax bill.

* A man with a heart condition from Revere. When he received his $5,500
bill, he had to take a nitroglycerin pill.

* A woman in Bradenton, Fla. Sold her home on the Cape, now owes
$23,000.

I got an e-mail from a constituent of Rep. George Peterson, the
assistant Republican leader. This guy sold some inherited stock to pay
for his son’s college education. The DOR now says he owes an extra
$7,500 — plus, of course, interest of $1,400.

"How can they charge me three years of interest," this taxpayer asked,
"on something I didn’t even owe until yesterday? What do they want me to
do — tell my son I had to send his tuition money to 'Taxachusetts' so he
can’t go to college this year?"

What do they care about your son, pal? Unless, of course, he’s an
illegal alien.

The move spells relief for 48,000 taxpayers who received retroactive tax
bills totaling over $150 million just before Thanksgiving.

"I am so glad that Speaker DiMasi and Senate President Travaglini have
ultimately realized what Republicans knew all along: that retroactively
taxing Massachusetts citizens is unfair and just plain wrong," said
House Minority Leader Bradley H. Jones Jr., R-North Reading. "Once
again, pressure from the media and the public has compelled the
Legislature to do the right thing."

The House and Senate leaders announced today that they would cancel the
retroactive bills, which were the result of a 2002 mistake the
Legislature made when it voted to increase the capital gains tax rate to
5.3 percent halfway through the year.

After the Massachusetts Supreme Judicial Court ruled that mid-year tax
changes are unconstitutional, the House voted to rectify the problem by
making the tax increase effective in January 2002. This allowed the
state to collect more than $150 million in retroactive taxes from
thousands of taxpayers who sold capital assets and already paid taxes on
them.

Gov. Romney, Jones and the Republican caucus consistently argued that
the state should instead push the date forward to January 2003 and
refund the money to taxpayers over a three-year period.

DiMasi and Travaglini today accepted that argument but agreed to instead
pay taxpayers back over four years.

One week after the Department of Revenue sent 48,000 taxpayers bills
seeking capital gains taxes from 2002, Senate President Robert E.
Travaglini and House Speaker Salvatore F. DiMasi today announced they
will take immediate action to prevent the collection of these
retroactive taxes.

"We will enact legislation next week to right a wrong situation that
we've tried to deal with for more than two years now," said Senate
President Travaglini. "This corrective action is our response to an
unintended consequence in dealing with two decisions from the Supreme
Judicial Court."

"After the SJC issued two extraordinary decisions, the Legislature has
worked to resolve the situation in an equitable and responsible manner,"
said Speaker DiMasi. "It was never our intent to have people pay
retroactive taxes."

Most recently, the Legislature sent the Governor a bill that would
exempt any taxpayer who owed less than $100 and forgave interest and
penalties for all capital gains taxpayers.

Under the proposed legislation, those taxpayers who owed capital gains
taxes from January 1, 2002 to May 31, 2002 will be notified to disregard
last weeks tax bills. Taxpayers who owed capital gains from May 31, 2002
through December 31, 2002 will receive refunds. Those refunds will be
paid out over four years.

Revenue Commissioner Alan LeBovidge today announced that preliminary
revenue collections for November were $1.119 billion, the same amount
collected last November. Total tax collections for the fifth month of
fiscal 2006 were $4 million below the revised November benchmark.

Year-to-date collections were $6.670 billion, an increase of $435
million or 7.0 percent over last year. After five months, fiscal '06
collections are $4 million below the revised benchmark. On October 26,
the full-year benchmark was raised by $509 million to $17.957 billion.

"November is a small collections month," LeBovidge said. "While most tax
types were off slightly versus the new benchmark, overall collections
year-to-date are still outpacing last year by 7 percent."

Income tax collections for November totaled $631 million, a decrease of
$16 million or 2.5 percent from last November. Withholding tax
collections totaled $632 million, a decrease of $19 million or 2.9
percent. The withholding total was reduced by a timing change that led
to a shift of $45 million from November to October. Without that timing
change withholding tax collections would have been up $26 million over
last November.

Sales and use tax collections in November were $324 million, up $14
million or 4.6 percent. Corporate and business collections were $5
million, a decrease of $19 million from last November.

Year-to-date income tax collections were $3.688 billion, an increase of
$195 million or 5.6 percent. Year-to-date withholding tax collections
were $3.191 billion, an increase of $130 million or 4.3 percent. Year-
to-date sales and use tax revenues were $1.706 billion, an increase of
$70 million or 4.3 percent. Year-to-date corporate and business tax
collections were $531 million, an increase of $167 million or 45.7
percent.

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